30 May 2012 17:32 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS)--It always pays to have alternate views of the future.
The International Energy Agency (IEA) says that unconventional gas – including shale gas, coal bed methane and tight gas – can transform energy markets. But it warns too that if the tide turns against fracking and the drilling of new gas-bearing deposits, coal will assume greater importance in the global energy mix and energy-related CO2 emissions will rise.
Global gas supply would remain very much in the hands of those who control the main conventional gas resources.
The agency’s world energy outlook report: “Golden Rules for a Golden Age of Gas” suggests to governments and other stakeholders that the environmental impact of fracking and the development of unconventional gas deposits needs to be taken very seriously.
“If this new industry is to prosper, it needs to earn and maintain its social licence to operate,” the report’s author, IEA chief economist, Faith Birol, says.
“If the social and environmental impacts are not addressed properly, there is a very real possibility that public opposition to drilling for shale gas and other types of unconventional gas will halt the unconventional gas revolution in its tracks,” IEA executive director, Maria van der Hoeven, adds.
Producing unconventional gas is an intensive industrial process, the IEA report acknowledges, adding that the industry needs to commit to apply the best practicable environmental and social standards at all stages of the development process.
If it doesn’t then the development of potential vast new resources of energy will stall. A golden age of gas will remain a dream.
The US clearly has taken great strides in developing its own unconventional gas reserves but a similar intensity of drilling activity is not welcomed by all. Not all governments are supportive of unconventional gas drilling activity. There are concerns about environmental degradation, water table contamination and even earthquakes.
But the IEA says that one million unconventional gas wells would be needed between 2012 and 2035 to drive its golden rules scenario which sees unconventional gas account for nearly two thirds of the 55% growth in total gas production to 2035.
To put the number of wells needed into perspective: 700,000 oil and gas wells have been drilled in the US over the past 25 years and 500,000 are currently producing gas. The US, the IEA says, would need to be drilling 25,000 new unconventional gas wells a year by 2035 compared with around 7,000 a year, today.
Unconventional gas has the potential to significantly alter the gas supply picture by boosting the influence of unconventional gas producers such as the US, China and Australia. The unconventional gas output growth from these countries would outstrip the growth in conventional gas supply from producers mainly in the Middle East, North Africa and Russia, in its golden rules case, the IEA says.
Not surprisingly, therefore, the IEA, which has 28 nation state members, is talking to governments. “To build on the Golden Rules, we are establishing a high level platform so that governments can share insights on the policy and regulatory action that can accompany an expansion in unconventional gas production, shake gas in particular. This platform will be open to IEA members and non-members alike,” van der Hoeven says.
Unconventional gas deposits do not recognise national boundaries, of course, and deposits outside the most widely discussed deposits in North America, South America, Europe, China and Australia could be significant.
Saudi Aramco, the world’s biggest exporter of natural gas liquids (NGLs), for instance, says in its 2011 annual review that: “There are early indications that the Kingdom’s unconventional gas resources may rival its extensive conventional gas reserves”.
Tapping in to such reserves globally, in an environmentally and socially acceptable manner, however, is a very real challenge. Hence, the IEA’s “Golden Rules for a Golden Age of Gas”.
Such guidelines can help pave the way for large-scale development of unconventional gas resources and boosting overall natural gas supply, the IEA says.
The rules include engagement with local communities and other stakeholders in well development, responsible drilling, venting and flaring, the disclosure of operational data on water use and waste water and methane gas emissions and “mandatory disclosure of fracturing fluid additives and volumes”.
Acting in a responsible manner drives costs up, however, the IEA suggests that the cost increase could be only 7% for a typical shale-gas well. “For a larger development project with multiple investment in measures to reduce environmental impacts [applying the golden rules] may in many cases be offset by lower operating costs,” Birol says.
Of direct relevance to the makers of petrochemicals, NGLs production in the US from deposits such as the Barnett shale, Eagle Ford and Marcellus fields, is increasing rapidly. Up to 1m bbl/day of new capacity is expected to be added by 2020.
The growth in NGL production is creating opportunities for petrochemicals production but, the IEA says action in needed to remove pipeline bottlenecks and provide additional fractionation and storage facilities if the benefits are to be fully recognised.
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